Economy

Rotich to review rate capping law after fuel levy talks

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Treasury secretary Henry Rotich. FILE PHOTO | NMG

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Summary

  • Treasury CS Henry Rotich told Parliament’s Finance and National Planning Committee that the matter will be returned to Parliament for consideration “as soon as possible.”
  • Lawmakers voted to keep the rate cap in the Bill, defying a move in June by Mr Rotich to remove it.
  • MPs have continued to insist that they are not ready to remove the upper limit of commercial lending rates at four percentage points above the central bank rate — which stands at nine per cent.

The Treasury has pledged to revisit its quest to repeal the interest rate capping law once MPs approve the Finance Bill.

Treasury Cabinet Secretary Henry Rotich told Parliament’s Finance and National Planning Committee that the matter will be returned to Parliament for consideration “as soon as possible.” Lawmakers voted to keep the rate cap in the Bill, defying a move in June by Mr Rotich to remove it.

President Uhuru Kenyatta did not mention a cap on lending rates when he proposed changes to the Finance Bill 2018, which will be debated today in Parliament.

“We shall revisit that matter as soon as possible. For now, we didn’t want to block the passage of the memorandum of the President on the Finance Bill,” Mr Rotich said while responding to a query by Alego Usonga MP Samuel Atandi.

The rate cap, introduced in September 2016, was aimed at helping small traders access capital at affordable rates but has had the opposite effect, with banks saying they cannot price risk to small and medium enterprises (SMEs) properly while the cap is in place.

As a result lending to the private sector fell from 9.3 per cent in 2016 to 2.4 per cent last year.

The International Monetary Fund had insisted for the cap to be scrapped or modified in return for a new standby loan arrangement.

MPs have continued to insist that they are not ready to remove the upper limit of commercial lending rates at four percentage points above the central bank rate — which stands at nine per cent.

Lawmakers did, however, remove the minimum deposit rate of 70 per cent of the central bank rate. Mr Atandi had sought to know the views of the Treasury and the President after the Head of State.

“After we rejected deletion of the Bill that wanted to repeal the four percentage points ceiling on loan charges above the Central Bank of Kenya (CBK) base rate, why has the President not found it fit to return it through the memorandum? Or is the Treasury and the President happy with what we did?” Mr Atandi had 0asked.